Monday, 15 May 2017

OF DECEIT, EMERA AND MUSKRAT MADNESS

GUEST POST WRITTEN BY CABOT MARTIN

Close
observers of things Muskrat are by now getting used to troubling news regarding
this benighted project.

However,
the most recent Uncle Gnarley posts building on revelations first made by a
former Muskrat Falls project engineer (aka the Unknown Engineer) on UncleGnarley on January 30, 2017must have shocked even the most cynical.

Seriously
- are we talking about someone playing fast and easy with the numbers?

If true,
would be big time shit.

Then came
last Wednesday’s stellar CBC St. John’s Morning Show interview by Anthony
Germain featuring the disguised voice of the “Unknown Engineer” repeating on
the public airwaves his astounding assertions ending with a call for a
“Forensic Audit” of the manner in which the Muskrat project costs were
prepared.

The next
day Mr. Germain followed up with an extended interview on the mechanics of a
Forensic Audit with financial wiz Larry Short – all of which served to turn up
the heat on this issue in dramatic fashion.

Said to
have been an act of conscience, the Unknown Engineer detailed a frightening
scenario wherein someone or some group (to work must have been a group) within
the Muskrat project team supposedly deliberately or recklessly ignored reality
in presenting the Project’s costs to their shareholder the Provincial Government.

The
parading of these lower than reasonable costs served to convince an
ill-informed and naïve Provincial Cabinet that the Muskrat project, that Nalcor
was so fervently promoting, made sense – when patently, to use some Nalcor
jargon, the “business case” was built on sand.

The
Newfoundland and Labrador Cabinet’s final and complete swallowing of the bait
can be precisely dated to the Muskrat Falls Sanction Decision of December 17, 2012.

But that
was “merely” when the final fatal step was taken. How far should a Forensic
Audit go back? If not then, then when?

How far
back should our Forensic Audit team, a band of financial sleuths with all the
latest gear, start hauling things apart? Looking at the "why" in
addition to the "what"; following the money; examining who knew what
and when.

These are
decidedly not the sorts of questions that the current Auditor General's review
and approach would involve. This makes The St. John's Telegram's Editorial
"Leave it to the AG" of last Friday (May 12th) all the
more inexplicable.

The
Unknown Engineer's "argument" did not "suggest" a Forensic
Audit to the CBC, he at some risk pleaded for one.

His
"argument" was not that "the numbers used to justify the project
were unrealistic from the start" but that those numbers were part of a
deliberate scheme to get the project going.

To begin with, the original cost of $6.2 billion on which the
project was approved was a complete falsification. The estimate was
deliberately kept low — below $7 billion, so as to appear favourable relative
to the cost of thermal power generation.

The likely costs were
known about three years ago, but Nalcor Management kept it a secret,
steadfastly denying that there were major schedule delays and cost overruns,
until it was no longer possible to hide the true status with the election of a
new Provincial Government.”

In spite
of this incredible statement, the whole Unknown Engineer matter is dismissed in
the Telegram's words with "At the moment, though, overweening political
pride is not a crime".

Did the
Unknown Engineer say anything about politicians? As far as I can tell he was
saying our elected politicians were duped from the beginning.

The
Telegram Editorial ends with a candidate for The Museum for the Morally Bankrupt:

"But
how much more blame can we afford? “

All of
which basically overlooks the "Forensic" in "Forensic
Audit"- like settling for an X-Ray when a CAT Scan is in order in the face
of a life threatening problem.

It's all just
a small step from the Telegram's position to "Move along; Move Along; Nothing
to see here Folks".

But I
digress into the weeds of God knows what and must return to matters of
substance.

A good
grasp of the history of any project is essential to any real Forensic Audit.

Consequently,
it is essential for one go back to the beginning, to the Williams Government’s
engagement of SNC-Lavalin in 2006 to prepare not only a technical feasibility
study of Muskrat Falls as a “stand alone” project but also, at the same time, a
financing plan for it’s development.

This
SNC-Lavalin study was evidently keystone, a point when an apparently
unstoppable momentum was created.

The
SNC-Lavalin Study Report has never been made public and the present Government
as a token of it’s sincerity in this matter should do so immediately.

One can
only speculate as to its contents but lacking, for now, a better starting
point, this SNC-Lavalin study and the process by which it was commissioned
would seem a good point at which to start any Forensic Audit.

And, of
course, we cannot forget that the Sanction Decision of December 17, 2012 itself
was followed by a series of Nalcor commercial decisions.

Such as
the awarding of construction contracts and equipment purchases with their
attendant cancellation clauses and penalties payable by Nalcor (i.e. us).

All of
which supposedly served to make it “too late” for this Province to reverse
course even when the abyss loomed.

Chief of
these entanglements was the triggering of Nalcor’s complex contractual
relationship with Emera – a corporate name that, it is safe to say, residents
of this Province will come to invoke with the same virulence as “Hydro Quebec”.

So the
Forensic Audit should properly cover all those Emera contract negotiations,
indeed must cover those negotiations, including the Emera-Nalcor dance before,
during, and as a consequence of regulatory hearings in Nova Scotia before their
Utility and Review Board (UARB).

Halifax
based Emera was, and is, of course, Nova Scotia’s “Chosen Instrument’ to not
just access our hydro power but more fundamentally to take advantage of this
Province’s billions in oil royalties.

So that’s
the problem, and in spite of some opinion more skeptical about our legal system
than this writer, I suggest that, as the man said, “There’s got to be a law
against that.”

If, for
discussion purposes, we take our Unknown Engineer to be correct, the next
obvious question has to be –

Did Emera
know (or should have known) that this egregious Nalcor behavior was going on
over on the other side of the negotiating table (more or less unknown to the
Newfoundland Government) when Emera entered into their vast and bewildering web
of Muskrat contracts with Nalcor?

The
jaded, demoralized reader might well ask:
“What difference would that make? Sure if it happened, it was all
Nalcor’s, thus our, fault. One Province is not another’s keeper.”

Well, by
virtue of Nalcor’s practice of secrecy from the start, not just from the public
but also from their supposed Provincial Government “masters”, Nalcor and the
Province for these purposes do not equate.

In any
event, if you will bear with me (with the caveat that this is in no way meant
as a “legal opinion”), I’d say maybe Emera’s role makes a lot of difference.

For some
basic wisdom in the matter, we should go back to ancient Greece, to the
oft-quoted words uttered by the great
Greek philosopher Sophocles (496 BC – 406 BC):

“Things gained
through unjust fraud are never secure.”

In other
words, when you are doing business with someone, don’t be surprised if when you
take advantage of that person’s patent mistake it comes back to bite you.

And, to
the main point, we could with Muskrat have a situation when all contracts based
on such behavior by Emera would be unenforceable by the courts and thus “voidable”
at the option of this Province.

If such a
case can be made, we could cancel all or any part of the Emera deal; like get
off (at least in part) the multi-barbed hook that has been so carefully
constructed.

Like “Not
Too Late”.

And this
might even go, if they were “in on it” like Emera, for those Muskrat bank loans
too.

If such a
case can be made, the cost of walking away at this stage may not be as drastic
as some have portrayed.

Now
Mister Short in his interview with Anthony Germain made a very good point –
when you are thinking about doing a “Forensic Audit” , you should always first ask
yourself what are you going to get out of it – it does cost money.

But if
someone could prove to me that there is definitely, without a shadow of a doubt
definitely, nothing, absolutely nothing, to what I am about to say regarding a
legal case of civil deceit against Emera, I would still support a Forensic
Audit.

Getting
to the bottom of what has happened here with Muskrat is like a test – a test
for all of us - it is where we grow up as a society - or not.

There is
no way we can build a decent and successful society, now or ever, with this
matter left unexamined in full.

The very
rocks cry out for a Forensic Audit.

By now,
of course, certain of the legal fraternity are rolling their eyes; Greek
philosophers indeed.

And we
are admittedly talking about the law of “civil fraud” – waters our courts are
normally reticent to wade into.

I hasten
to add that such “civil fraud” is not your run of the mill, Nigerian scam
letter fraud, nor qualifies as “fraud” contrary to the Criminal Code of Canada.

No, I am
talking about a “civil” matter, something that is often studied in Law Schools
as “Fraudulent Misrepresentation” and an “Action of Deceit”.

In spite
of the harsh sound of it, civil fraud is pretty mild stuff; no one goes to jail
as a result of such an action.

It comes
under the old English Common Law concept of an action in “tort” which sounds
like some sort of medieval torture but again as the law goes mostly pretty mild
stuff; nuisance is a tort; trespass is a tort ; obnoxious neighbour dumps
garbage over the fence onto your land – tort.

One
classic legal text on the Law of Contract makes plain the objective nature of a
civil legal action based on “Fraudulent Misrepresentation” or “deceit”:

Quote:
“Motive is irrelevant in an action of deceit. Once it has been proven that the
Plaintiff [that’s us – Newfoundland - the aggrieved party] has acted upon a false
representation which the defendant did not believe to be true, liability
ensues, although the defendant may not have been actuated by any bad motive.”

Now all
this would be worth the predictable cries of skepticism in certain St. John’s
and Halifax office towers -- but for the leading Supreme Court of Canada case
in the matter – a very recent one too and binding on lower Canadian courts.

It’s
known as Bruno Appliance and Furniture, Inc against Hryniak and can be found at
2014 Supreme Court of Canada Reports starting at page 8.

In that case, the Supreme Court of Canada set out clearly the
requirements necessary to establish the tort of civil fraud (or tort of deceit).

The Bruno case dealt with a far different fact situation from
Muskrat but it’s
the underlying basis, the core of the Supreme Court’s thinking as expressed in
its judgement that is important and clear.

Justice Karakatsanis, writing for a unanimous Supreme Court,
outlined the four elements of the tort of civil fraud:

Quote:

"From this jurisprudential history, I summarize the
following four elements of the tort of civil fraud:

(1) a false representation made by the defendant;

(2) some level of knowledge of the falsehood of the
representation on the part of the defendant (whether through knowledge or
recklessness);

(3) the false representation caused the plaintiff to act; and

(4) the plaintiff's actions resulted in a loss.” Unquote

So would a
Muskrat action by the Province against Emera meet such a four part test?

To start
we must note that the Supreme Court is aware of the need for caution in this
area which is so key in business relations. At the same time, the court knows
that egregious behavior is not a proper basis for a properly working business
climate.

One
possible basis of an action in deceit could be stated thus:

“Emera
knew (or should have known) that Nalcor’s numbers were ridiculous and reckless
and nevertheless took part with Nalcor in an elaborate public charade to take advantage of an ill-informed and naive Provincial Cabinet to Emera's benefit and to our detriment.”

Importantly,
the Supreme Court said that a defendant (say Emera) can cross the deceit line
“through knowledge or recklessness”.

Recklessness.

If there
is one thing that we should have no problem proving is that in its actions,
well known to, if not actively colluded in by, Emera, that Nalcor set the Gold
Standard for economic recklessness.

Nalcor
and Emera/Emera and Nalcor – this pair could well be the Bobbsey Twins of
Muskrat Recklessness.

Emera
knew that Nalcor was not keeping it's shareholder (the Government) properly
informed and were selling them a load of hogwash - and the Supreme Court of
Canada seems to be saying that in such circumstances Emera should not be
allowed to benefit from such actions.

Requirement
4 - that a loss to this province
resulted – would be the easy part.

32 comments:

June 2010 when the decision was made to stop Gull island, and to switch to Muskrat Falls. By November 2010 there was a term sheet with Emera. Shawn Skinner could not tell us what the electricity coming from the project would cost until April / May of the following year.

The 2.2 Billion dollar preference for interconnected option was premised on a fraud. The biggest part of which is that none of this business case presented to the PUB excluded the Emera part of the deal!.

Build it and they will come...

No one told us that the incremental cost of electricty from Muskrat Falls (some 1000 GWhr which is all we need) would cost in the range of 50 cents per kw hr.

The public are not truly engaged now. But the calls for a FA will be replaced with calls for a public inquiry once our rates double.

The inquiry should start with our own apathy, and of course Danny.

All the electricty in Labrador could not keep his legacy energized once the rates double.

I have long thought that the DG estimates were being manipulated so as to not rock the boat, not upset the public, to keep the pre-sanction estimate below a level that would be politically palatable, and later to keep one of the project's DG estimates below Wade Locke's $8 billion mark (if I recall correctly, Nalcor at one point reduced its contingency from 15% to 7.5%, and if my memory is correct, that allowed the estimate to remain below the $8 billion mark --- where Wade Locke had said that if the cost of Muskrat exceeded $8 billion, then the project would not be economic).

I think there were other highly questionable assumptions made and methods used that aided in hoodwinking the public --- using a 40 year backward-looking demand record to argue that the 50+ year 0.8% average yearly increase in demand was "conservative", an oil price forecast that ignored the up and down nature, the volatility, of oil prices and used a forecast that kept going up and up (and which was nothing more than an extrapolation for the last 30 years of the 50 forecast), etc., etc., etc, etc.

Mr. Martin has certainly put forth what seems to be an opening that could lead to shedding some light on how, why and by whom this travesty has been foisted on unsuspecting citizens (and on those citizens not yet born).

This could very well not only be a way out of at least some of this mess, but as mentioned, also a measure of our maturity as a people, and as a province.

Garland Laliberte15 May 2017 at 13:02These same tactics were used by Manitoba Hydro in Manitoba to justify proceeding with the Bipole III Transmission Project.

Cost was publicized in 2014 at $3.3 billion even though unofficial Manitoba Hydro leaked reports had already revealed that the expected cost would be in the order of $4 billion. With the project now about half built, the latest "control budget" exceeds $5 billion.

Another tactic employed was to overstate the forecast of future domestic load growth by looking at load growth 20 years backward in order to include a decade of high growth at the turn of the millennium even though load growth had flattened considerably in the most recent decade.

Finally, the decision to proceed relied on forecast prices to be realized for exported energy that failed to take into account the depressing effect of fracked gas and slow-to-decommission coal as energy sources in Manitoba Hydro's export market for its excess energy.

Sound familiar?

In Manitoba, the problem is amplified by the Keeyask Generation Project, a sister project, one closely connected to the Bipole III Transmission Project. Keeyask originally projected to cost $6.2 billion when the decision was made to proceed now has a "control budget of $8.7 billion and it still has almost four years to go before completion.

When MF was being discussed, we were told that it would mean increased electricity costs early on but they would level off and flatten over the longer term. If we did not do MF, the cost of electricity would keep rising over time and we would not be able to afford to heat our homes with electricity in the long run. Better to pay a little more now and have stable prices in the long term than to be subject to ever increasing electricity costs forever. If this assumption was accurate and is still true, let's finish building MF and reap the rewards of low electricity in the long term.

This assumption was always inaccurate and was never true. Surely you can see past the enabling lies by now.

If $200 million was invested in demand side management and actively shaving the peak load (like all enlightened utilities do now) there would be no need for new capacity. If Nalcor spent another $200 million investing in wind and battery storage Holyrood could be shut down as well. Compare that $400 million to the 11 billion (and counting) on the disaster on the Churchill.

The result would have been lower bills for consumers, lower costs for the taxpayer and a welcoming business environment. Instead of this win, win, win you have Danny's Dreadful Disaster or lose, lose, lose.

Mr. Marcocchio, where do you get the numbers you are quoting. $200 for demand side management would mean no need for new capacity. $200 million for wind and battery storage could shut down Holyrood, you say. I am not aware of these numbers being confirmed so I ask where is the back up?

State of the art wind turbines cost 4 to 5 million and produce 4 to 6 Mw at 4 to 5 cents per KwH. Compare this cost to Muskrat power at at least 50 cents KwH. This is an order of magnitude cheaper and can be rolled out in stages as required.

Demand side management (DSM) reduces power consumption by the UTILITY paying for upgrades to homes (new windows, insulation,heat exchangers etc.) Industry can have incentives (lower rates) to shift usage to off peak times.

None of this is rocket science and is employed around the world to minimize usage and costs to a utility that can avoid expensive capacity like Muskrat Falls. If Nalcor had invested in reducing energy costs to consumers instead of feeding the greedy oligarchs you would have saved billions.

Industrial battery storage and load balancing (very expensive now for utilities) is now available as a service and would be much cheaper and do much more than Holyrood's dirty expensive power.

I would agree that Bruno`ss figures are off some. I did an assessment in 2012; here is what I stated:With the additional island hydro identified by Nalcor and allowing wind up to 10 percent as Manitoba Hydra stated was technically not a problem......these two together cost about 1 billion. For Demand Side Mnagement: heating and hot water for 151,000 houses offered the potential for 462 MW reduction , essentially the capacity of Holyrood. For efficent heating units (mini-splits) the cost about 1 billion BUT.......this reduces heating energy by more than 50 percent and saves about 11,000 per house over the life of the units. This is financed by the customer and incentives: suggested 13,000 houses per year and reducing 40 MW per year, so 12 years to reduce Holyrood to zero with DSM alone. This costs Nalcor nothing, generally formula is two thirds by customer and one third by the incentive. With the combination of the island hydro and wind and DSM, Holyrood would go to zero in 7 to 8 years. As DSM is self financing through energy saved, the capital for total solution would have been 1 billion (plus the cost of the third line from central at about 200 million. How realistic was this for DSM........well Nova Scotia achieved 50 MW reduction per year once scaled up, and installed 20,000 efficient heating units in 2011 alone. This overall (DSM, wind, hydro and third line, would have cost about 1.2 billion, and yearly power bills could have remained flat, or damm close to it. My 3 part series on this was published by the Telegram in 2012. Part 2 and 3 can be found on the blog Vision 2041, under the heading EFFICIENCY, scroll to the bottom, Part 1 of the series may be under the Letters heading. Interesting, in hindsight,where we could be today, not then knowing that Nova Scotia was active in this approach.......following on the well known success in the USA of such cost effective measures. Cost overall:one tenth of 12 billion.....and yearly bill flat. And, yet even today, is there one in a thousand who has ever heard of DSM! Meanwhile customers are active doing this, over 10, 000 now in Nfld,without incentives installed efficient heatng, and will help stop the demand from rising ( and eliminate the need for MF.........but rather late, unless we stop the waste of another 6 billion........which we seem on course to do.Winston

A couple of things Winston. The cost of wind and solar has tumbled in the last five years since 2012. Your comparison needs updating.

Secondly battery storage makes it possible to have wind at much more than 10% of capacity. You have also not taken into account the reliability and availability of battery stored energy. Manitoba Hydro did not consider this or the cost savings of load balancing as a service to a utility.

The bottom line is I think we both agree that cheap renewables would have been an order of magnitude cheaper than Danny's Dreadful Dream. Aggressive DSM would REDUCE rates for consumers not spike them like MF.

Agreed that wind energy has come down and storage is more cost effective that in 2012, and even the efficiency of heat pumps is better.(Nalcor and MHI said technology improvements for housing had reached saturation.......another whopper) In 2012 the figure generally was that customer efficiency was one third the cost of any new supply source. Nova Scotia`s achievements at about average 3 cents per kwh costs is about 18 times lower cost per kwh than MF. What I thought was aggressive efficiency measures in 2012, was realistic based on Nova Scotia results. Some DSM measures may not reduce rates but substantially reduce actual yearly bills by less energy used. Nova Scotia assess many DSM measures, while I addressed what seemed the priority ones addressing electric heat.

My heating bill for 1000 sq ft is 268 dollars a year. Now recently I installed a sensitive monitor that records and stores the data . My heat cost:Month of April 318kwh = 30.84 tax not includedMay to today 116kwh = 11.25 tax not includedHeat is always on 22 or 23 C.April and May has been cold here, usually frost at night.This technology is being denied to people on low income, but moderate income people are investing in it.......wait until the power price doubles! I have tried to get some economist to write on UG on the elasticity factor for electric heat, but no luck...........as this will kill baseboard heating demand soon.......but not soon enough to stop waste of another 6 billion. Cheers (listened to the Lennon piece......really good)WA

That Emera took advantage of Nalcor is beyond question. Nalcor was desperate to get the funding in place to proceed with Danny's dream. Emera pushed the equity stake it took in this hare brained scheme to maximize its benefit, as any contracting partner would.

There is no evidence, and Cabot you have provided none, that Emera had knowledge of the ridiculous lowballing of the cost of Muskrat. Your suggestion that Nalcor deceived the government and proceeded against the best interest of NL is ridiculous on its face. The direction and impetus for Muskrat came exclusively from the government of NL. The deception was top down, Nalcor did not deceive the NL government, they acted on commands from the top. Your argument is specious and misses the point entirely.

Are you wanting to engage in another decades long legal entanglement trying to prove that a deal signed by your government should be invalidated? You seem to have a flat learning curve. A deal is a deal.

Now that you have admitted that MF was based on deception and manipulation, why are you starting at the bottom, the result, and not looking at the top, the political impetus from the top to sell Muskrat Falls to the regulator (that was neutered from the top) and the public.

If you seek a remedy look to the top and follow the money through that contract with SNC Lavalin, the negotiated take or pay contract, the agents that negotiated the contracts and the killing of the freedom of information act that was required to sanction this project.

Your mention of Danny as a last thought was too cute by half. The problem and the remedy is top down not bottom up (using tortured logic). Move heaven and earth to make public those contracts using your renewed FOIA and any public pressure your trained legal mind can muster.

I could not have said it better Bruno. It seems to me it was not Emera's responsibility to protect the NL ratepayer from its own public utility and Government. However, this project would never have seen the light of day without Harper's loan guarantee, nor could it have proceeded through to this day without Trudeau's loan guarantees consented as recently as November of last year. These guarantees allowed Nalcor to finance the project with a minimum of scrutiny. Contrary to Emera, the federal government had a responsibility to ensure that the underlying project they were sanctioning was viable.

I, too, agree with Bruno`s assessment. This blunder came from the top, Premier Williams ( who still defends it a great project, our Legacy Fund project). Others followed his orders or wishes and made it happen. Indeed, I believe the Nova Scotia minister stated that Nfld and Nalcor viewed it as a loss leader.......some loss!. Now if a new air carrier offers a return flight from Orlando for 99 dollars, do you question whether they loose money on that and bear responsibility for their apparent loss. Danny said, as to Muskrat, that sometimes you need to roll the dice......so a gamble, not an investment, and void of any proper assessment, either financial or technical. So yes , that 2006 SNC- Lavalin report should be public......and much more. I believe there is a better case against Nfld Power (Fortis) than Emera, if one considers the lower cost options instead of Muskrat. Bruno mentions some aspects of the alternatives. Last year, Tom Johnson stated that both Nfld Power and Nfld Hydro failed in their Conservation and Efficiency Plan in Nfld. Indeed, here we rank second worse in the country. DSM should have been a very significant component of evaluating our energy options, but was ignored, and still being ignored. What was Nfld Power`s role in keeping this off the list of alternatives being considered! While I much respect Cabot Martin`s opinions on Muskrat, especially the North Spur issue, I doubt if Martin has much appreciation of the value, low cost, and scope in potential for Demand Side Management, as an important component that was ignored. Nova Scotia`s plans to reduce demand by some 470 MW, and achieved more than 120 MW from 2008 to 2012, exceeding their target. Lessons to be learned! The cost of this investment ranged from 1.5 to 3.6 cents per kwh saved, vs 55 cents for new Muskrat generation,( and usually 12 to 18 cents for Holyrood generation, and 28 cents for our new gas turbine generations). Yet we turn our heads and mind away from the kwh that cost less than 5 cents ...........why! Tom Johnson, our Consumer Advocate and a Muskrateer, on the eve of his tenure, made a feeble attempt to set a new course. The Nfld Power official, told me that Johnson would not have the last word......and he was right. Johnson called no expert evidence, and did not want to call such evidence, to show the failure by our power companies, and his opinion was ignored and never even noted by the media. And he soon afterwards lost his job as CA......good riddens, as too little , too late by Tom, who backed and was an advocate for MF for years. Winston Adams

Boys, were are grinding over old territory so to speak. NALCOR/NL GOV are incapable to alter the "get er done" people. Muskrat is a National disgrace, and your own MP's are doing nothing to remove the Fed subsidy, or at least call in the Auditor General. What happened to your own cabinet minister? Why are you not calling your Tory-minded Liberals to account?

I'm not too sure even if Cabinet had all of the facts and figures in front of them they would object to Lil Dan's Muskrat Plan. Beth Marshall and Loyola Sullivan were forced out by DW and were 2 of the few voices that would question him.

Ed martin, Gil Bennett and the Board of Directors at Nalcor that had 8/13 seats UNFILLED lacked the knowledge and expertise in hydro and megaproject construction - this was by design so the project would face virtually no oversight. Very few if any MHAs at the time had such experience or expertise as well, it wouldn't be hard to slip past their collective intellect or gullibility.

MF was never sold on its economic or business case but by bigoted Trump-like fanaticism that HQ/Quebec were the enemy. Due to one mans ego and insecurities NL opted for the "go it alone approach" to show them NL can do a project without ANY help.

It is too bad the Federal parties caved on the FLG because the project was impossible without it. Trying to appease a populist leader for NLs 7 seats has cost Canadian taxpayers a lot and is set to double NLrs electricity rates.

As for the accusation Nalcor fudged, manipulated, plugged, deceived, lied, low-balled the actual cost of MF to sell it to the public as the Least Cost Option - that is quite plausible but the same can be said about the NLPC Party as well.

Wade Locke's credibility will take an even further beating with these allegations hanging in the air as his entire MF 'presentation' at the Harris Center was single sourced from the proponents. Let's just say if the Nalcor presentation was a thesis it contained no original research as it was an rehash.

It says a lot about the caliber of Cabinet when they were all fooled by the false numbers and could not foresee any problems with the project.

Liberals continued support of MF from the previous gov is baffling and their handling of getting rid of Ed Martin was amateurish.

Time for the Federal Gov to intervene and aid NL in an forensic audit from conception to current.

Sympathetic as I am to the demand for an audit, the fix was in very early: the Joint Review Panel that did the environmental assessment concluded in August 2011 that the financial benefits were unproven. In March 2012, both the federal and provincial Cabinets told the JRP it was wrong and the government, relying on Nalcor, knew better. Eventually, the project went to the Public Utilities Board

"Recommendation 4.1 – Government confirmation of projected long-term returns"The Panel recommends that, if the Project is approved, before making the sanction decision for each of Muskrat Falls and Gull Island, the Government of Newfoundland and Labrador undertake a separate and formal review of the projected cash flow of the Project component being considered for sanctioning (either Muskrat Falls or Gull Island) to confirm whether that component would in fact provide significant long-term financial returns to Government for the benefit of the people of the Province. Such financial returns must be over and above revenues required to cover operating costs, expenditures for monitoring, mitigation and adaptive management, and financial obligations to the Innu Nation. The Panel further recommends that the Government of Newfoundland and Labrador base these reviews on information on energy sales, costs and market returns that have been updated at the time of sanction decision, and make the results of the reviews public at that time. The financial reviews should also take into account the results of the independent alternatives assessment recommended in Recommendation 4.2 [Independent analysis of alternatives to meet domestic demand].

"Response:"The Government of Newfoundland and Labrador accepts the principle that a review of the Project’s financial viability is required prior to sanction, but does not support the Panel’s assumption that the information provided by the proponent was inadequate. Based on information that Nalcor has already provided, the Government is satisfied that the development of each component of the Project will result in significant financial benefits to the Government for the people of the Province, over and above revenues required to fund the mitigation measures and monitoring activities that the Project requires."

At the end of March 2012, the Public Utilities Board refused to offer an opinion on the advisability of the Muskrat Falls project because the information provided by Nalcor was so inadequate, but again, both the province plunged ahead.

"The Board concludes that the information provided by Nalcor in the review is not detailed,complete or current enough to determine whether the Interconnected Option [i.e., Muskrat Falls and the Labrador-Island Link] represents the least-cost option for the supply of power to Island Interconnected customers over the period of 2011-2067, as compared to the Isolated Island Option [i.e., not building Muskrat Falls and finding new generating facilities on the island]."

The Nova Scotia past energy minister states in his blog that Nfld wanted to by pass Quebec with Muskrat and Gull island, and that Nalcor felt that MF was NOT the lowest cost option for Nfld needs, but was proceeding that way regardless. Seems the Tory Govn wanted this regardless of cost or reliability and asked Nalcor to give the justification. Justification meant complete falsification of costs and manipulate and mislead on engineering analysis.............if this is not criminal than there is little justice. Volkswagan committed fraud and got fined billions , and banks , GM etc do similar .....ususaly high fines but no jail time..........but fraud is often criminal for smaller crimes of fraud. So is intend to commit fraud the difference?

Deliberately hiding cost increases appears to be fraud to me. The motive is pure and simple greed to obtain as much as possible from the gravy train. The hourly mark-up on employees on site is more than Mike Duffy's yearly housing allowance so we are talking massive fraud if it can be proven. Unlikely that Emera did anymore than just take advantage. Like Fortis, their NL part is small in relation to the overall business. The culprits are more likely closer to home

Good idea Robert. A direct request to the AG from a group of concerned citizens is also a good idea.

It is a slow process and he takes a limited number of issues on each year. Immediate and forceful concerns about the feds lack of due diligence on the finances prior to the loan guarantee is the federal hook.

I wonder if Dave Vardy et al. are moving on this? Cabot's energy is also better spent getting the AG on the case rather than suing Emera.

Robert. you are too polite....need to say what the F..k is going on in NL.F..k! A word I first heard used on my days during the Upper Churchill construction by guys from Quebec mostly, and considered rather naughty word, but nowadays rather common, but personally don't like the word. Too muck like swearing. But sometimes swearing just seem the right thing to release an emotion. Bruno knows what I means. Even John Lennon sometimes found it necessary. But it does suggest, we ordinary folk are being F--ked around with by our politicians and elite citizens. Doing it since the Fishing Admirals. That's why we need the public floggings brought back, but this time we need to flog the F--kers who F--k with us. 12 billion for what might only be 218MW of power, and unreliable power at that..........has anyone, any salt of the earth group of people on this planet even got F--ked like that!. Man......that is big time shit. Any King Danny tells us it is our Heritage Fund Project. Some heritage. No Oversight Committee Report because the Committee Chairman got Coffey spilled all over it..........or took the report with him and no one can find him or the report. I think the holdup is the last chapter titled Muskrat Mitigation on rates, promised last year by Stan. There is talk that 22 cents may get down to 21 cents. But that Feehan is pushing for 16 cents (least there be total economic collapse) and never the twain can meet.........so no report. Hear the same type of complaint in Washington, where committee members doing investigations have made written requests to the WH for two months now looking for information, and not a word of reply. Talk of obstruction of justice there. And they have CNN on their side. We only have CBC, Russell and Ashley at the Telly, and a handful of troublemakers here on UG. Nothing wrong on the Rock........business as usual. Nothing wrong when no information or reports are made available. Just too busy being busy. Oh, and just delete those F words. Not me talking..........I meant to say Fuddle Duddle.PF

Is it that our savvy political leaders and industry professionals are completely incompetent, OR, is it heinous corruption that's the root of such project miscalculations?

It astounds me to experience the number of people who do not understand the magnitude of this situation. I feel education on this issue is a major problem. Many people choose not to engage in something that is so complex. I confess I read this blog and many facets regarding contracts and laws etc go over my head. But I follow because I am fed up with escalating taxes, gas prices, municipal assessments and so forth and now have to worry about a doubling heat ing bill.

Here's a thought. Would a dedicated website highlighting all things proven shady be a start to engaging the public? Quick-to-the-point facts and write-ups that would possibly peak interest to dig deeper, start following this blog or maybe just inspire more educated water cooler conversations. Maybe a simple URL like... www.muskratFAILS.ca

I just think if people had one place to get ALL 'Muskrat FAILS' presented in an easy to follow manner there'd be a better chance for public engagement/outcry. Am I wrong?

DM, I am with you, as I have been astounded, as an engineer,who once worked with Nfld Hydro, as to the the technical things proven to be shady, as you say.......while economic and legal, and environmental shady areas others are more component to state facts. Perhaps shady areas can be classified as Technical, Financial and Legal, Environmental........perhaps if not a separate website, then as headings under this website ....to comprise a list. As to technical,some examples;Power reliability:1. Salt is not a contaminant for the transmission line. Fact.....the area of the Great Northern Peninsula is by far the worse in the province and perhaps North America for salt contamination outages on existing lines there.2. An overhead ground line that on the Labrador side of the line; the risk of faults causing outages was reduced by Nalcor about 90 percent without good reason3. That cost effective technology to reduce house energy use for heating was ignored in the alternatives, 4. That acceptable wind energy that was cost effective and was only 2 percent of our energy, was determined by Manitoba Hydro as being technically ok for 10 percent of more.5. That by 2011, off the Avalon, a severe reduction in using electricity for the main source of heat was on the decline....an indicator that long term demand energy forecast was excessive.These are only samples (Liberty has documented many reliability issues that has not yet been taken up by the PUB) ......and I would expect there are some 100 assumptions that are now known to be false or unreliable to justify this project, and were or should have been known to be false before sanction. Any one assumption may not be critical, but the accumulative value says there was great incompetence, great stupidity, or corruption, it seems to me. Many items are factual. Some are opinions that are evidence based, so very dependable. Opinions that lack an evidence based should carry little weight.Winston Adams

Here is my letter to the editor (Telegram) Hydro's concerns about ratepayers should've come to fruition before the Muskrat Falls escapade.18% rate hike was proposed by Hydro to come into effect July 1 knowing the legal limit for a hike was 10% by the PUB in any year.Where was the concern for ratepayers a decade ago from Hydro? Decision gate 2 had Muskrat Falls power pegged at 16.4 cents kWh or an 50% increase in power bills, not a peep from Hydro about ratepayers at the time. Now 18% is too much for ratepayers yet a single year increase of 50% passed through Hydro's Board of Directors for MF without any questions or concerns? Hydro also endorsed the insane demand forecasts going up to 10500 GWH by 2041 from 2010s 7600 GWH with Long Harbour being the only new confirmed power customer. Hydro further endorsed the demand forecast increasing to 12000 GWH from 2041 to 2067.Nalcor/Hydro/PCs ignored price elasticity for residential demand, even NLs most infamous MF booster Wade Locke had a slide in his Harris Center presentation "empirical data has shown for every 20% price increase for electricity there is a correlating 5% demand decline". Using the empirical data NLs residential demand should DECREASE by 12.5% under MFs excessively high kWh DG2 rate. Hydro used the last 40 years of power demand underhandedly as the last 20 years residential demand has remained flat, the first 20 years was when homes switched to electric heat. Electricity prices from Holyrood Thermal might've increased to 16.4c kWh if oil had remained at $100 bbl but Hydro assumed ratepayers would consume the same amount of power even with yearly increases. Least cost option had $100 oil and HRT operating at 3X its current output over a 57 year projection, talk about rigging a process to a predetermined outcome: Conclusion MF is the ONLY option for NL. Nalcor failed in its fiduciary duty by bundling the Labrador Island Transmission Line in with the MF dam when they should've been viewed separately. LiL cost of $4 billion would've been $100M a year for 40 years or an increase of 19% for residential ratepayers. LiL and the third line from Bay d'Espior would've lowered the fuel consumption at HRT by millions of barrels of oil thereby saving NLrs hundreds of millions in electricity production costs over that 40 year period. Between recall power and an HQ PPA to make up the difference with the LiL NLrs could've been looking at a MAXIMUM of 16.4 c kWh, not a floor or base of 16.4c kWh as we had then. DG2s 16.4 c kWh was roughly $900 more in power bills per home annually, now with the updated 22c kWh from Boondoggle Falls it's $1800 more in power bills per home. [END]

Nalcor was 20 years too early with their demand forecasts as NL will only require new generation by 2036, noting NLs population is set to drop 10% by the late 2030s. 10% pop drop + 22c kWh MF power and Nalcor's already overly optimistic demand forecast (DG2) was a false narrative from the start. MF still requires thermal backup, 1400 KM of LiL transmission lines can takes weeks/months to fix if there is a break.

20-25% rate hike pays for the LiL in 40 years while allowing NL access to our own 300MW of UC recall power and capacity for an HQ PPA to make up the difference.

LiL also allows exporting of wind power, minimal spillage at our existing dams and our dam reservoirs to be full before winter - all would reduce fuel usage for thermal generation: Every 1 GWH of energy procured via LiL is 3,000 less bbls of oil at HRT. 20% HRT reduction from 2017-2041 is 14,400,000 LESS bbls of oil required in that time or $720M less then what Nalcor projected at current prices.

I've got it. Let's use the power of sanction. Get Congress to sanction DT, take away his visa. He is too dangerous to mankind to allow him loose on the World Stage. No MOABS, No direct control on the Military, FBI, CIA, etc. Let's have the Opposition parties in the NL Legislature come up with similar sanctions on the Government. Place the NALCOR under control by a Citizen's Committee, etc.

Sadly as the reality of the costs begin to sink in, an aging population, reduced revenue for oil and little likelihood of any new major developments over the next 30 years due to new cheaper technologies in the continental US, I really don't see much future for anyone in our province. If rates rise to double or even triple our current rates, our population decline will accelerate placing an ever expanding burden on those that remain. Once my children are out of school I will almost certainly pull up roots as well and leave a place I chose many years ago. Just look at Puerto Rico. I think the train is unstoppable. "The Ship is Sinking", the only question is how much time do we have! Too Bad

About Des Sullivan

Uncle Gnarley is written by Des Sullivan, of St. John's.
He is a businessman engaged in real estate, retail and development companies.
A Director of Sullivan Capital Corporation, he is a former Executive Assistant to Premier's Frank D. Moores (1975-1979)and Brian Peckford (1979-1985).
He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB).
Uncle Gnarley permitted the use of his highly regarded name provided he could have full access to state his own rather unequivocable opinions. (A more detailed Profile of Uncle Gnarley is described in the very first Post entitled "Uncle Gnarley is alive and well" found on this site.
Sullivan is a firm advocate of sound fiscal management by the provincial government and intends to use this Site as a forum for commentary on the major issues of the day. Says Sullivan, "Newfoundland and Labrador inspires debate on a variety of issues, a veritable Muskrat Falls of opinion".
Readers are invited to leave their opinions, too.
Uncle Gnarley will post every Monday, and more often as events warrant.